What Trump means for Canadian prosperity

Laura Dawson is director of the Canada Institute at the Wilson Center in Washington.

Justin Trudeau wins a majority. The U.K. votes to exit the EU. The United States elects Donald Trump as president. Long shots all, but now they are political facts of our lives. How did Mr. Trump become president-elect? Pundits will take this question apart in the coming days but, given what we have seen of the candidates, the results are less an endorsement of Mr. Trump's abilities to be president and more an indictment of the state of politics in the United States.

More important than why, is what happens next? How should Canada prepare for life next door to President Trump? What we have now are inklings based on conjecture because, in the campaign, the policy positions laid out by Mr. Trump were either inconsistent or were sufficiently vague to leave us wondering how the proposals would work in practice.

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Reasons to worry: Some of Donald Trump's strongest campaign promises were rooted in nativism, protectionism and xenophobia. As the United States' nearest neighbour, Canada is directly vulnerable to border and market closing measures and indirectly vulnerable to actions that dissolve the trade, security, and environmental agreements to which Canada is a party.

Reasons to worry less: Many of Canada's interests have often been better served by Republican governments, who favour liberalized trade and private enterprise, than by more protectionist Democratic governments. Mr. Trump has consistently presented himself as a pro-business candidate and, despite the threats to rip up trade agreements, strong trade relations with Canada make good business sense. Canada is the largest buyer of U.S. exports in the world – more than all of the states of the European Union combined. Trade with Canada supports nearly 5 per cent of U.S. employment and 6.5 per cent of U.S. GDP.

Relatively speaking, Canada is in a better position than other countries. While Trump has threatened to build a wall against Mexico and impose punitive tariffs against China, he has limited his remarks about the Canadian border and trade to "not our biggest problem." Arguably, if Mr. Trump rips up the NAFTA, then the Canada-United States free-trade agreement remains intact beneath it, so Canada's preferential trade access remains, albeit at circa 1989 levels.

The policy disconnects that should be of most concern are Canada's climate-change measures. President Obama and Mr. Trudeau established a strong initial partnership on climate change that justified Canada's aggressive carbon-reduction policies to help Canada reach its emissions goals faster, but these also raise the costs of transportation, manufacturing, and agricultural production compared with most U.S. states.

Mr. Trump claims that global warming is a hoax perpetrated by the Chinese so it is quite likely that U.S. climate-change policies will slow down or stop altogether, meaning that Canada's relatively higher costs of production will drive manufacturing and investment to lower-cost-carbon states south of the border.

Trump supporters have also argued that a President Trump would behave quite differently from a Candidate Trump. Much of the bombast of the campaign trail would be reined in by the institutional limitations of the job. They explain their candidate's extreme statements were not intended to be taken literally but were designed to create a more favourable negotiating position for future deals. And, Trump's advisers and key appointees will likely be cut from more moderate cloth and will help to curb his more excessive tendencies.

Whether or not these moderating statements are correct, what is true is that Canada's friendship and support will never be as important to the United States as it will be in the coming years. President-elect Trump is rewriting the rulebook of what it means to be America in a globalized world. Canadian partners can help temper extreme inclinations into more moderate and innovative proposals.

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What is also true is that the Donald Trump campaign has captured the support of people who are tired of elite political decisions that seem far removed from the everyday lives of most American – people who are not stupid, but who are portrayed as such by many in the political establishment. Mr. Trump offers hope to Americans whose economic future in a globalized world is uncertain.

While his inward-looking, border-closing prescriptions make little economic sense, the fear and frustration that they reflect are no less real. Through Brexit and the election of Donald Trump, we understand how the discontented and the disconnected have the power to block. What remains to be seen is how to utilize the same impulses that can carve a path for progress to a more prosperous and equitable future.

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